The ‘true’ cost of electricity can be a difficult thing to calculate because of all the subsidies, taxes, and duties that the power sources receive, and that’s not even factoring in the impact these power sources have on human health, ecosystems, and free environmental ‘services’.

So in a recent study, researchers from Green Budget Germany (GBG) took a closer look at these hidden costs, in order to get a better idea of electricity’s true cost. Their new research calculated the health and environmental expenses related to various currently-available energy sources.

According to that research, the cheapest energy sources in the world currently are wind power and solar power. “One kilowatt hour (kWh) of electricity produced by wind power stations on the coast or in the countryside costs an average of 0.07 euro (about $0.09).”

“New solar energy plants in central and southern Europe produce electricity for an average of 0.14 euro per kWh. In Germany, the cost is about 0.18 euro when using rooftop solar panels, while in southern European solar parks it costs about 0.10 euro per kWh.”

The report makes the point that electricity that is produced from new coal plants is twice as expensive as wind power, and around the same cost as solar power. This combination of increasing energy costs and continued innovation in clean energy technology will, by 2020, make wind power and solar power the cheapest way to produce electricity by far, according to the GBG.

Using fossil fuels to generate electricity results in pollutants that lead to high economic costs — in particular, greenhouse gases like carbon dioxide, according to the GBG report. As another example, the particulate pollution from coal power plants has been proven to regularly lead to respiratory disease. When a child develops a respiratory disease from this choice of power source, then it incurs high medical costs that are subsequently paid for by the government or the child’s family, and that’s not even including an effect this disease has on quality of life.

“An extensive 2006 study by Nicholas Stern, the former chief economist of the World Bank, also estimated high costs from the consequences of using fossil fuels. By the end of the century, it said the bill would total over 5 trillion euros ($6.4 trillion).”

It is coal power plants that are the most destructive to the environment, based on the research done by Barbara Breitschopf from the Fraunhofer Institute. “Power plant operators currently pay only a small portion of these costs as part of the so-called CO2 certificate. European citizens are currently paying about 0.09 euros per kWh for health and environmental damages by generating electricity from coal.”

While wind power is considered to have a very limited effect on the environment, the production of photovoltaic cells for solar power currently does have some negative effect on the environment. To produce solar modules, a large amount of electricity is needed, which leads to higher emissions — this results in an extra cost of 0.01 cent per kWh.

Nuclear energy costs, predictably, much more than other sources because of the truly massive costs of disasters like Fukushima and Chernobyl.

The report continues:

Calculating the cost of nuclear energy is more difficult. A newly constructed nuclear power plant raises the average cost to about 0.20 euros per kWh, according to the California Energy Commission. By contrast, old, written off plants in Germany produce electricity at a bargain rate of 0.02 or 0.03 euros per kWh.

However, other risks not covered by power plants operators affect the total cost of nuclear energy, such as the chance of a nuclear accident. It’s estimated that Fukushima and Chernobyl have cost many hundreds of billions of euros, and that society has paid most of the damages.

GBG’s Bettina Meyer has analyzed studies on these external costs in her recent report. She estimates that additional risks raise the cost of nuclear energy to between 0.11 and 0.34 euros per kWh. If these costs were added to electricity costs, a kWh of electricity generated by a new nuclear power plant would cost between 0.31 and 0.54 euros and, if produced by an old plant, between 0.13 and 0.36 euros.

I would be interested to know how wind and solar compare to coal and nuclear in Australia, where we have different costs, different subsidies and, in many locations, superior wind and solar resources.

Giles Parkinson

HI Ian. I will take a punt on that, and say that the best wind can be built at or below 8c/kWh (Snowtown), but most at 10c/kW. The best solar can be built at 15c/kWh, but we don’t really know because we haven’t built any. It will be cheaper in WA cos of more sun, and it will be worth more because it coincides with peak demand. And then we turn to the BREE report which says that by 2020, the best wind will be around 6c/kWh, the best solar PV at around 7c/kWh, and that will be cheaper than new build coal or gas (and they are not factoring in health effects there either). The only nonsense BREE produces in that graph is the belief that nuclear can be built now at 6c/kWh, although the solar thermal chaps are not happy either.

http://ronaldbrak.blogspot.com.au/ Ronald Brak

Is that with a 10% discount rate? With a 7% discount rate, which seems to be about the go at the moment, I get a cost for wind at about seven and a half cents a kilowatt-hour. And of course, point of use solar is cheaper than coal power for consumers.

Pat Wall

Yes but the big problem with Nuclear is it is ALWAYS subsidized heavily to get it down to those costs per kW/h and they never factor in the decommissioning costs at end of life, which is around 50 years. Also, the do not factor in the waste and tailings related costs. If you factor all of these in Nuclear is likely the most costly of them all.

Paul

Well at last! The benefit of wind power economics has resulted in the Essential Services Commission of South Australian today announcing its intention to reduce ‘the regulated tariff’ by a whopping 8.1%
As your column has been saying for some time, ‘wind has resulted in a very significant reduction in wholesale prices’, the flow on to retail pricing has been slow in being recognised.
Is this a world first event?

Dr Nick

Can anyone find the actual report?? My 5 mins of searching has turned up nothing.

http://ronaldbrak.blogspot.com.au/ Ronald Brak

A simple rule of thumb for working out cost per kilowatt-hour, taught to me by Ned Kelly, is 10% of the capital cost divided by the number of kilowatt-hours produced in a year. This is quick but rough way to compare different sources of electricity. Or, if one wants to try to be a bit more precise, one could muck around with this page here to try to get a more accurate figure:

The true cost of electricity from wind power is about 2 tot 5 cent per kWh, depending on how the wind farm is financed.
Anything higher is useless commercial profit.

It is useless commercial profit, because wind power is more or less risk free.
Wind power is the same every year
Turbine manufacturers guarantee a uptime of 98% for the wind farm.
So, why should there be a commercial part of the cost?

Scott Brooks

I don’t see how wind porduction costs have been evaluated correctly here when in the US the shows these facts:

Solar is federally subsidized at 5.6 times that of coal; wind: 5.3 times, and nuclear: 1.7times that of coal

The U.S. in 2009 allocated a total of $25 billion to energy subsidies. 60% ($11 billion) of this went to “renewable” energies that produced less than 4% of US power. Each green kWh of electricity costs American taxpayers $.025 in subsidies. For natural gas the same kWh costs $.00025 or 1% ! (The avg. KWh cost in the U.S. is 10 cents)

Between 1981 and 2008 the “fossil” fuels industry has paid to the federal and state governments: $388 billion in income taxes and $472 billion in severance and windfalltaxes. Additionally there has been $1.1 trillion collected in excise and sales taxes on petroleum products. The renewable industry has produced a net drain on the U.S.Treasury.

So the analysis by the GBG looks to be flawed and contrived. Solar and Winds statistically based on real production histories require 7x the infrastructure erections to compensate for intermittent and remoteness from consumers. That means much more industrial production and MINING. CALL THAT GREEN?

And if green is so good for Germany why is it now importing energy and coal? The research is biased! I find this a consistent factor in most pro green/renewable sites.

http://ronaldbrak.blogspot.com.au/ Ronald Brak

Scott, are you saying that if I put a solar system on my roof I need to have infrastructure erections as a result of that? Care to explain how that works, or have you just failed to think it through and are simply parroting lies?